2018 (9) TMI 283 - AT - Income Tax

100% depreciation on shuttering and centering material - depreciation claimed in the earlier year or not? - Held that - If the assessee has claimed 100% depreciation on such shuttering and centering material in the earlier year then there will be no opening balances brought forward from the earlier year but it may be that shuttering and centering material which was put to use in the earlier year, 100% depreciation might have been claimed and allowed and only those material not put to use in the earlier year might have been brought forward in the present year. This may also be a fact that part of the assets might have been put to use for less than 180 days and in that situation, only 50% of depreciation is allowable and as a result, even if depreciation is allowed @ 100%, in fact, only 50% will be allowed in the earlier year and the balance 50% is to be allowed in the present year. Therefore, merely on this basis that there is opening balance of WDV, it cannot be concluded that 100% depreciation was not allowed in the earlier year. Hence we feel it proper to restore the matter back to the file of CIT (A) for fresh decision - Appeal filed by the assessee allowed for statistical purposes.

Summary

Issues:
- Disallowance of depreciation on shuttering and centering sheets
- Applicability of rule of consistency in allowing depreciation
- Treatment of centering sheets as plant & machinery for depreciation
- Claim for 100% depreciation on centering sheets
- Disallowance of interest under section 234B

Disallowance of Depreciation on Shuttering and Centering Sheets:
The appellant contested the disallowance of depreciation on shuttering and centering sheets amounting to ?50,40,355. The appellant argued that each sheet is an independent unit eligible for 100% depreciation, emphasizing that the nature of the sheets is consumable. The appellant further claimed that the authorities erred by not considering judicial pronouncements in favor of the appellant and failing to apply the rule of consistency. The Tribunal noted the importance of consistency in allowing depreciation and directed the matter back to the CIT (A) for a fresh decision after verifying if 100% depreciation was allowed in earlier years.

Applicability of Rule of Consistency in Allowing Depreciation:
The Tribunal emphasized the significance of maintaining consistency in allowing depreciation, citing a previous case where the AO was not permitted to deny a claim in a subsequent year after allowing it in a prior year. The Tribunal highlighted the necessity for verifying if 100% depreciation was granted in earlier years to ensure a fair decision in the present case. The matter was remanded to the CIT (A) for a fresh decision based on the factual position regarding depreciation claims in previous assessments.

Treatment of Centering Sheets as Plant & Machinery for Depreciation:
The appellant raised concerns regarding the treatment of centering sheets as plant and machinery, leading to a lower depreciation rate of 15% instead of the claimed 100%. The appellant argued that the sheets should be considered temporary structures eligible for 100% depreciation as per Income Tax Rules, 1962. The Tribunal acknowledged these contentions, indicating the need for a reevaluation by the CIT (A) to determine the appropriate depreciation rate for the centering sheets.

Claim for 100% Depreciation on Centering Sheets:
The appellant contended that centering sheets should be eligible for 100% depreciation due to their temporary nature. The appellant disputed the lower depreciation rate of 15% applied by the authorities, emphasizing the correct classification of the sheets as temporary structures. The Tribunal recognized the appellant's arguments and directed a reassessment by the CIT (A) to ascertain the correct depreciation rate for the centering sheets.

Disallowance of Interest under Section 234B:
The appellant denied liability for interest under section 234B of the Act, claiming that the computation details were not provided adequately. The Tribunal did not delve into this issue explicitly but allowed the appeal for statistical purposes, indicating a partial victory for the appellant. The decision did not provide a detailed analysis of the interest disallowance but focused on the depreciation-related issues in the appeal.